Maryland allows certain taxpayers to claim a credit for taxes paid by a Pass-Through Entity (PTE) on their behalf. These credits are commonly reported on Maryland Schedule K-1s issued by partnerships, S corporations, estates, and trusts.
The Flow-Through Nonresident PTE Tax and PTE Tax Paid on Resident Members' Distributive or Pro Rata Shares of Income entries help ensure taxpayers receive credit for taxes already paid at the entity level.
Program Entry
To access these sections, navigate to:
Maryland → Credits → Flow-Through Nonresident PTE Tax
and
Maryland → Credits → PTE Tax Paid on Resident Members' Distributive or Pro Rata Shares of Income
What Is a Pass-Through Entity (PTE)?
A Pass-Through Entity is a business entity whose income, deductions, and credits pass through to its owners or beneficiaries.
Examples include:
- Partnerships
- S Corporations
- Certain Limited Liability Companies (LLCs)
- Trusts
- Estates
These entities may pay Maryland tax on behalf of their members, shareholders, partners, or beneficiaries.
Flow-Through Nonresident PTE Tax (Form 502CR)
The Flow-Through Nonresident PTE Tax credit applies when a Maryland pass-through entity pays tax on behalf of a nonresident owner, shareholder, partner, or beneficiary.
The tax paid by the entity may be claimed as a credit on the individual's Maryland return to prevent double taxation.
What Amount Should Be Entered?
Enter the amount of Maryland nonresident PTE tax reported to you by the pass-through entity.
This amount is typically shown on:
- Maryland Schedule K-1
- Maryland Form 510 K-1
- Trust or estate Schedule K-1
Special Rule for Estates and Trusts
If the credit is being claimed by an estate or trust, Maryland requires additional documentation.
Form 1041 Schedule K-1 Nonresident PTE Tax: Submit Form 1041 Schedule K-1 for the estate or trust and a copy of the K-1 issued to the estate or trust by the pass-through entity.
Keep copies of all supporting documentation with your tax records.
PTE Tax Paid on Resident Members' Distributive or Pro Rata Shares of Income
Maryland also allows a credit when a pass-through entity has paid Maryland tax on behalf of a resident member's distributive or pro rata share of income.
This credit helps ensure that the same income is not taxed twice.
Who May Qualify?
You may qualify if:
- You are a Maryland resident.
- You received income from a pass-through entity.
- The pass-through entity paid Maryland tax on your share of the entity's income.
What Amount Should Be Entered?
Enter the amount of Maryland PTE tax paid on your behalf as reported by the entity.
This amount is generally found on:
- Maryland Schedule K-1
- Maryland Form 510 K-1
- Other pass-through entity reporting documents
Supporting Documentation
The Maryland Comptroller may require supporting documentation to verify the credit.
Taxpayers should retain:
- Maryland Schedule K-1s
- Form 510 K-1s
- Trust or estate K-1s
- Pass-through entity tax statements
- Any related Maryland credit schedules
Certification and Submission Requirements
For credits requiring supporting documentation, the preparer or taxpayer may need to forward requested forms and certifications.
Documents may be submitted:
By Email:
cert@comp.state.md.us
By Mail:
Revenue Administration Division
Electronic Processing Section
P.O. Box 2364
Annapolis, MD 21404
Important Notes
- Only enter amounts reported by the pass-through entity.
- Do not enter withholding amounts from Forms W-2 or 1099 unless specifically instructed.
- Keep copies of all Schedule K-1s and supporting documents.
- Incorrect entries may delay processing of the return or result in adjustments to the credit claimed.
- Resident and nonresident PTE credits are reported separately and should be entered in the appropriate section.